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WHAT YOU AGREE TO GRANT US
You grant to Us and We are entitled, upon the terms and subject to the conditions set forth in this Warrant Agreement, to purchase from You, at a price per share equal to the Exercise Price, that number of fully paid and non-assessable shares of Your Warrant Stock equal to Three Hundred Thousand Dollars ($300,000), divided by the Exercise Price.
In addition, You grant to Us and We are entitled, upon the terms and subject to the conditions set forth in this Warrant Agreement, to purchase from You, at a price per share equal to the Exercise Price, an additional number of fully paid and non-assessable shares of Your Warrant Stock equal to three and one-half percent (3.5%) of any amounts advanced under the Part 1 Commitment Amount of the Loan Agreement, divided by the Exercise Price.
The number of shares of Warrant Stock and the Exercise Price of such Warrant Stock are subject to adjustment as provided in Section 4 hereof.
For purposes of this Warrant Agreement, the following capitalized terms have the meanings given below:
Exercise Price means the lower of (a) $5.375 and (b) the lowest per share price for which Your preferred stock is sold in the Next Round.
Next Round means the next bona fide round of equity financing in which You issue and sell shares of your preferred stock for aggregate gross cash proceeds of at least $1,000,000 (excluding any amounts received upon conversion or cancellation of indebtedness) subsequent to the Effective Date.
Warrant Stock means (a) the class and series of Your preferred stock issued in the Next Round, if the lowest per share price for which such preferred stock is sold in the Next Round is less than $5.375, or (b) in all other cases, Your Series D Preferred Stock. For avoidance of doubt, if this Warrant Agreement is exercised prior to the Next Round then this Warrant Agreement shall be exercisable for Your Series D Preferred Stock.
The Parties agree that this Warrant Agreement to purchase the Warrant Stock has a fair market value equal to $100 and that $100 of the issue price of the investment will be allocable to the Warrant Agreement and the balance shall be allocable to the Loan Agreement for income tax purposes and the original issue discount on the Loan Agreement shall be considered to be zero.
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WHEN ARE WE ENTITLED TO PURCHASE YOUR WARRANT STOCK.
The term of this Warrant Agreement and Our right to purchase Warrant Stock will begin the Effective Date, and shall be available for ten years from the Effective Date, through and including November 13, 2014.
|3. || |
HOW WE MAY PURCHASE YOUR WARRANT STOCK.
We may exercise Our purchase rights, in whole or in part, at any time, or from time to time, prior to the expiration of the term of this Warrant Agreement, by giving You a completed and executed Notice of Exercise in the form attached as Exhibit I. Promptly upon receipt of the Notice of Exercise and in any event no later than twenty-one (21) days after you have received Our Notice of Exercise and payment of the aggregate Exercise Price for the shares purchased, You will issue to Us a certificate for the number of shares of Warrant Stock that We have purchased and You will execute the Acknowledgment of Exercise in the form attached hereto as Exhibit II indicating the number of shares which will be available to Us for future purchases, if any.
We may pay for the Warrant Stock by either (i) cash or check, or (ii) by the net issuance method as determined below. If We elect the Net Issuance method, You will issue Warrant Stock using the following formula:
X = Y(A-B)
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|Where: || ||X = || ||the number of shares of Warrant Stock to be issued to Us.|
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| || ||Y = || ||the number of shares of Warrant Stock We request to be exercised under this Warrant Agreement.|
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| || ||A = || ||the fair market value of one share of Warrant Stock (as of the date of such calculation).|
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| || ||B = || ||the Exercise Price (as of the date of such calculation).|